Abbott's levy brings furious condemnation from all

Tony Abbott.

Prime Minister Tony Abbott, already forced to water down his "signature" paid parental leave scheme, faces a mounting backlash against his plan to impose a special tax to help pay off the nation's debt.

Although no final decision has been made, Abbott has confirmed the Government is considering a special four-year levy that threatens to shred his credibility by reneging on his key election promise of no new taxes.

Abbott denies the "deficit reduction" levy is a tax because it is only a temporary measure, but it is opposed strongly within his own Liberal Party ranks and is almost certainly headed for defeat in the Senate.

The Government has again slipped back behind Labor in the opinion polls and is bracing itself for a heavy political hit after next month's federal Budget, expected to slash welfare and social programmes and haul back spending in most other areas.

Abbott is appealing to Australians to think of the nation rather than themselves when Treasurer Joe Hockey announces the Budget on May 13. "I know that the tendency on Budget night is to focus on 'what's happening to me' but we need to focus on 'what's happening to us' because everyone needs to be involved in fixing Labor's debt mess if all of us are to prosper in the years ahead," he said in a speech to the Sydney Institute.

But Abbott is under fire on multiple fronts. His bills to repeal the carbon and mining tax remain blocked in the Senate, his paid parental leave scheme has been pared back, forecast cuts to welfare and services have been furiously condemned, and the proposed levy appears in danger of stillbirth.

Analysis by the Australian showed the combined impacts of the levy, cuts to benefits and higher taxation through bracket creep as incomes rise could top A$50 billion ($54 billion) over the next four years.

Leaks indicate Abbott plans to levy an additional 1 per cent on taxpayers earning more than A$80,000 a year, rising to 2 per cent for incomes above A$180,000.

The levy would be imposed on more than two million families and collect about A$2.2 billion a year without significantly affecting total projected debt of about A$670 billion.

Furious Liberal MPs have anonymously slammed the proposal, calling it "crazy" and "electoral suicide". They said the levy would be a new tax in clear breach of Abbott's campaign promises.

The levy also goes against the grain for Liberal MPs, who have a strong aversion to any new taxation and who voted against the special levy former Labor Prime Minister Julia Gillard imposed to help fund reconstruction after devastating floods and cyclones in Queensland.

If Abbott goes ahead with the levy it will collide with roadblocks in both the present Senate and the new Upper House that sits in July.

Labor has rejected the levy outright, calling it a "deceit tax".

"Labor will have no part of it," Opposition leader Bill Shorten said. "No amount of weasel words by Tony Abbott and his Liberal Government can change the truth - a tax increase is a tax increase is a tax increase."

The Greens also oppose the plan and Clive Palmer's United Party, whose three Senators in alliance with Motoring Enthusiasts Senator-elect Ricky Muir will hold the balance of power in the new Upper House, will vote against the levy.

The proposal is further opposed by industry and business groups.

Meanwhile, Abbott has agreed, under pressure from within the Government and Labor, to prune back his generous paid parental leave scheme that would have provided full wages for new mothers earning up to A$150,000 for six months.

The scheme, which would have cost A$5.5 billion a year, will now be capped at incomes of A$100,000, reducing the maximum payout from A$75,000 to A$50,000.